Example: Auto-Margin Replenishment Process

A trader has an available balance of 2.5 BTC. The current price of BTC is 8,000 USD. He opens a position for 80,000 BTCUSD contracts using an initial margin of 1 BTC with 10x leverage. With the maintenance margin rate at 0.5%, the liquidation price is calculated to be at 7,306 USD. The remaining available balance would be 1.5 BTC.

Mark Price falls to 7,306 USD and reaches the Liquidation Price, Auto Margin Replenishment will automatically take over the process and prevent the position from being liquidated. It will use an amount from the available balance to replenish the margin back up to 1 BTC, leaving 0.5 BTC left in the available balance. The new liquidation price would now be 6,381 USD, and the initial margin calculated for this position would now be at 2 BTC.

Should the price of BTCUSD continue to fall and reach the new liquidation price of 6,381 USD, Auto Margin Replenishment will once again come into effect but this time, only replenishing the position with the remaining 0.5 BTC left in the available balance. The new liquidation price of the position would now be at 5,827.5 USD.

However, as there isn’t any available balance left in the account, should the price hit 5,827.5 USD, the position would finally be liquidated as Auto Margin Replenishment would not automatically come into effect anymore to prevent the position from being liquidated.

Notes:

1) When liquidation is triggered, the system will first cancel all unfulfilled active orders in the account in order to free up more available margin and use this to try and avoid liquidation

2) Please note that the calculations above do not include any trading fees